The Federal Reserve meeting and October jobs report are on the docket next week as investors wrap up a brutal month for markets. The Fed is widely anticipated to hold rates steady when it announces its decision Wednesday. But of more importance to investors will be the commentary from Fed Chair Jerome Powell during the press conference. A hawkish stance from the Fed leader could hurt investor sentiment further and add to fears of a recession at a time when markets are already under considerable pressure. Stocks are headed for their third straight month of losses as Treasury yields rise to multiyear highs. Both the S & P 500 and Nasdaq Composite slid into correction territory this week following some disappointing megacap tech reports. “I suspect that the Fed is not going to comfort the market,” said James Camp, managing director at Eagle Asset Management. .IXIC YTD mountain Nasdaq Composite YTD But others are more hopeful the Fed chief will shift his focus to the economy and employment as he reaches the tail end of his rate hiking campaign. Morningstar’s chief U.S. market strategist Dave Sekera anticipates the Fed is done hiking, and projects the Fed will start to lower the federal funds rate in the first half of 2024. “As we forecast the rate of economic growth to slow and inflation to moderate, this allows the Fed to move to increasingly more accommodative language in early 2024 to prepare the market in advance for when they decide to begin cutting rates,” Sekera wrote. When will the Fed cut? Many investors expect stocks could remain choppy until the markets gain clarity on when the Fed will start to cut rates. But answering that question has remained challenging as investors weigh a raft of concerns that includes tension in the Middle East, a potential government shutdown in November, and a weakening consumer, against reports of a resilient economy . For example, the third-quarter gross domestic product data that came out this week showed the U.S. economy still growing at a fast clip, with a 4.9% annualized increase. That was better than the 4.7% increase anticipated by economists polled by Dow Jones. But some investors expect the blowout number may be the last of the strong reports, as the GDP figure is a lagging indicator. They say the long and variable lags in monetary policy will start to be felt in the coming months, possibly leading to a downturn before the Fed starts to lower the fed funds rate. “I think the impact of these higher rates [is] going to be felt looking out six months,” said Nick Galluccio, chairman and CEO at Teton Advisors. “So I would say by the middle of next year, you’ll have some recession, a couple of quarters of maybe negative GDP growth, and that would be the catalyst I believe for stocks, for the Fed.” Bond yields, which have risen sharply over the past several months, will also need to fall in order to lift the pressure from equities. Some investors are wondering if Powell will address the growing fiscal deficit as bonds continue their selloff. This week, the 10-year Treasury yield continued to hover around the key 5% level. “I think the bond market is finally suggesting that there is going to be pushback from long-term interest rates if that continues,” said Camp, the Eagle Asset Management’s strategist. “So, it’ll be interesting to see if Powell addresses the fiscal situation.” Jobs report Investors will get another look into the labor market next week soon after the Fed decision. The October jobs report that comes out Friday is expected to show the U.S. economy added 175,000 jobs last month, according to consensus estimates from FactSet. That will follow a blowout number from the prior month, when the number of jobs added came in at an astronomical 336,000 jobs. Meanwhile, the unemployment rate is expected to remain in line at 3.8%, according to FactSet. “If and when we start to see some real slowdown in job growth, I think we can begin to exhale on the fed’s hawkish stance,” Camp said. Elsewhere, Apple is reporting earnings on Thursday. Investors are concerned the largest S & P 500 stock by market cap will also crack after its run this year, up by about 30%. A brutal October Charlie Ripley, senior investment strategist at Allianz Investment Management, is concerned a “cloud of uncertainty” amid geopolitical risks and other concerns will continue to weigh on equities into the year end. “I think putting all these things together behooves people to take some risk off the table,” Ripley said. “And until we start to see more clarity, I don’t think it’s going to turn very quickly.” But historically speaking, at least, seasonal weakness in September and October typically gives way to an end-of-year rally during the holiday months. Even with the slide, Teton Advisors’ Galluccio is hopeful that equities can rally in time as they price in the effects of a slowing economy. “I believe we’ve been in a bear market,” Galluccio said. “And I believe we’ve run a long way toward ending the bear market.” Week ahead calendar Monday, Oct. 30, 2023 10:30 a.m. Dallas Fed Index (October) Earnings: Public Storage , Simon Property Group , On Semiconductor , Western Digital , McDonald’s Tuesday, Oct. 31, 2023 8:30 a.m. ECI Civilian Workers (Q3) 8:30 a.m. FHFA Home Price Index (August) 9 a.m. S & P/Case-Shiller comp.20 HPI (August) 9:45 a.m. Chicago PMI (October) 10 a.m. Consumer Confidence (October) Earnings: First Solar , Advanced Micro Devices , Caesars Entertainment , Pfizer , GE Healthcare Technologies , Caterpillar Wednesday, Nov. 1, 2023 8:15 a.m. ADP Employment Survey (October) 9:45 a.m. Markit PMI Manufacturing (October) 10 a.m. Construction Spending (September) 10 a.m. ISM Manufacturing (October) 10 a.m. JOLTS Job Openings (September) 2 p.m. FOMC Meeting 2 p.m. Fed Funds Target Upper Bound Earnings: Marathon Oil , Clorox , Costco Wholesale , Qualcomm , Norwegian Cruise Line Holdings , Yum! Brands , Airbnb Thursday, Nov. 2, 2023 8:30 a.m. Continuing Jobless Claims (10/21) 8:30 a.m. Initial Claims (10/28) 8:30 a.m. Unit Labor Costs preliminary (Q3) 8:30 a.m. Productivity preliminary (Q3) 10 a.m. Durable Orders final (September) 10 a.m. Factory Orders final (September) Earnings: Apple , News Corp. , Booking Holdings , Eli Lilly , Starbucks , Paramount Global , Moderna Friday, Nov. 3, 2023 8:30 a.m. Jobs Report (October) 9:45 a.m. PMI Composite final (October) 9:45 a.m. Markit PMI Services final (October) 10 a.m. ISM Services PMI (October) Earnings: Cardinal Health
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